Month: July 2013

FarmRaiser, a startup that is reinventing school fundraisers by providing healthy, local items for sale instead of the usual unhealthy and tired fare, launched their first pilot project this summer. More than a dozen high school students participated in a summer entrepreneur’s club and rose over $1,400 in two weeks, all while gaining valuable experience in sales, marketing and accounting.

Items sold included fresh blueberries from a local orchard and honey and salad greens from urban farms. Working in teams, the students visited farms to learn more about the foods they were selling, devised marketing plans, and held their own ‘shark tank’ competition.

Farmraiser presented at our Food Investor Network event in May and has a presence in Flint, MI, where this pilot was based, and Seattle. They plan to soon launch an additional 30-40 campaigns in Puget Sound area and suburban Washington, DC school districts.

If you are interested in investing in FarmRaiser or any of our other Slow Money NW businesses, you can check out our investor space on Gust.

Do you know of any Food and Farm businesses looking for financing? Send them our way! Building on the success of our Food Investor Network event in May, we will be holding another meeting on November 4th and are looking for six businesses that are ready or will work with us to prepare to pitch to our network of investors.

Earlier this month, the Securities and Exchange Commission (SEC) announced new rules that provide a new option for businesses to raise capital from investors.[1] Under the old rules, most small businesses typically raised funds from friends and family, banks, or by participating in “Angel Investor” meetings. One of the challenges under the old rules was that a business was very limited in who it could offer the investment to. By and large, it was simply not an option for the business to solicit investors via social media, public web sites, or by using other methods that tended to reach large audiences. While the new rules do not replace the old rules, the new rules come with new requirements that raise the question of whether the benefits outweigh the burdens.

If a business seeks to raise capital by selling securities, such as equity, then it needs to consider the securities laws, both state and Federal. Generally, unless at least one of a handful of exemptions applies, the business must complete a registered IPO (Initial Public Offering) if it wants to sell its equity (or other securities). Generally, the most-used exemptions were only available if the business only offered and sold the securities to acquaintances, so publicly advertising the offering had to be avoided.

So, what are the new rules? Under the new rules, a business may offer its security publicly, regardless of whether there is a pre-existing relationship between the business and the investor, but only Accredited Investors may purchase the security. An Accredited Investor is someone who meets certain qualifications under the securities laws; one example is an investor who either has a net worth of at least one million dollars or has an annual income of at least $200,000.[2]

While the new rules will likely make it easier for businesses to connect with accredited investors, they also bring on new issues. One such issue is that the business will have an increased obligation to verify that the accredited investor is actually accredited, and that verification process could be invasive, so much so that the investor may be put-off. In addition to the rules that have already passed, a new rule was proposed that would require businesses that choose to publicly solicit their offerings to first file a notice with the SEC, whereas under the old rules the notice was filed after the first sale.

These new rules become effective on September 23, 2013.[3] So, what does this mean for Slow Money businesses and investors? In short, the new rules open new doors for small businesses to raise capital, but a business needs to carefully consider whether the new rules are appropriate for a given offering due to the additional burdens.

Kevin is a business and securities attorney who is based in the Seattle area. www.kfichterlaw.com

This article is provided solely for general information purposes; it is not intended to be legal advice, and it is not intended to serve as a substitute for legal advice. The information provided here may not apply to any specific set of factual or legal circumstances. Also, the law tends to vary from jurisdiction to jurisdiction, and it is frequently changing. No attorney-client relationship is form, and no such relationship should be implied. For legal advice, please consult with an attorney licensed in your jurisdiction.

[2] The new rule is known as “Rule 506(c)” under Regulation D. Regulation D, which is codified in the Code of Federal Regulations, Title 17, Part 230, Sections 500-508, is also where the guidelines concerning Accredited Investors are found. The text of the new rule has yet to be codified, but it may be found in the SEC Release cited in footnote 1.

[3] There are actually three different rule announcements at play here. The main one is cited above in footnote 1. Those rules become effective on September 23, 2013. Another set of related amendments become effective on August 23, 2013. SEC Release 33-9414. July 10, 2013. The third set are still in the proposal stage. SEC Release 33-9416. July 10, 2013.

Impact investing is a growing movement, with over $3.74 trillion invested in socially responsible funds here in the United States last year. In the Puget Sound, groups such as the Slow Money Northwest, Northwest Energy Angels and Goodfunds Wealth Management are pioneering this type of investing with much success. Yet experienced investors such as Ammen Jordan see an opportunity to expand these efforts.

Ammen recently created a survey to better understand this community of individuals and organizations and if and how it is growing. And there is clearly room for growth. Only 37% of respondents are frequently making a positive impact through investing though 69% aspire to do so.

The way that most respondents currently have impact is through their charitable giving. Regarding the balancing of financial returns with social and environmental, respondents were split on whether they were a financial or impact investor first. Their expressed interest was across sectors, with top interest in economic development, clean energy and sustainable land use/agriculture. Most investors wanted to invest in early stage companies and companies on the brink of expansion. Of those that have invested, the typical size of investments in these types of companies is $10,000 – $25,000 with a targeted rate of return between 9-12%.

Ultimately, Ammen wants to know what can be done to lay the groundwork for sustaining these impact efforts. Many respondents cited education as a way to build the community and increase its investments, either through educational events or opportunities to have conversations with more experienced investors.

“My primary objective is to create a virtuous cycle in the impact investing community by identifying and connecting aspirational entrepreneurs and investors with the resources they need to be successful. I envision a thriving impact investing community with an infrastructure that helps members build valuable networked relationships and gain meaningful access to related information, tools, resources and investment opportunities through periodic meetings, trainings and events,” says Ammen.

If you are interested in connecting with Ammen to learn more about the results or how you can expand your investments that have social or environmental impact, please email him at ammen@energyfriendly.com